Financial worries tend to haunt people as they grow older. Perhaps the most daunting of these is how to pay for long-term care if it is needed.
Some folks seek to ease their concerns by purchasing long-term care insurance. But sometimes the insurance itself causes people to fret.
Such is the case brought to my attention by Vicki, who said a friend of hers received a letter from her insurance company saying its rates were going up. The company gave Vicki's friend two choices. She could pay the new rate and continue the insurance, or the company would keep the $4,000-plus in an account for when, or if, she goes into a long-term care facility.
"She would rather obtain her money back, but the letter didn't give her that option," Vicki wrote in an e-mail.
As Vicki looked over her friend's paperwork, she discovered the friend actually has three long-term care policies, purchased in 1994, 1997 and 2002, all from the same agent.
"They all pay $50 a day, but I don't know if they would all pay at the same time, or if one would pay first, then if she still needed care, the next one, and so on," Vicki wrote. "Isn't that illegal, for one agent to sell multiple policies to the same person? Both of the people (a married couple) are paying three premiums per month."
These are all good questions, Vicki. For answers, I turned to David W. King, CLU (Chartered Life Underwriter), CSA (Certified Senior Advisor) and president of Senior Care Advisors & Insurance in Salt Lake City.
David wrote in an e-mail that long-term care insurance often is oversold by insurance agents and misunderstood by purchasers.
"The first thing to say about LTC insurance is that if you've got it — absent any other planning — you should keep it," he wrote. "LTC insurance is often more difficult to qualify for than life insurance. The longer seniors wait to purchase LTC insurance, the more expensive it will be — and more difficult to medically qualify for."
And seniors do need to plan for long-term care, because it isn't cheap. David wrote that such care in the Salt Lake area costs anywhere from $35,000 to $60,000 per year, or more.
To pay for long-term care, he wrote, seniors have three options. One is to buy LTC insurance. Another is to "self insure," which means exposing all of a senior's assets to the risk of long-term care costs if they choose not to do any planning.
"This option includes the kids contributing to their parents' LTC or taking Mom and Dad into their homes," David wrote. "Very often when seniors opt for the 'self insurance' option, this leads to the third option: government LTC benefits. Here is where seniors end up broke, if they aren't already."
That's because Medicare covers only 20 days of long-term care, he wrote. And while Medicaid does pay for such care, without planning, most assets have to be spent for care before qualifying.
All of this points out the importance of planning — without it, seniors often go broke before qualifying for benefits.
But let's get back to Vicki's questions. Regarding her friend's increasing premiums, David wrote that the $4,000 she already has contributed will pay for about one month in a fair long-term care facility.
"My advice would be to continue paying premiums on the existing policy for a month or two longer while looking at alternatives, such as shopping for another policy or doing comprehensive senior planning with professionals well-versed in the long-term care laws that uniquely affect seniors," he wrote.
The second question, regarding the three separate policies, contains some good news, David wrote. If each policy pays $50 per day, or $150 per day total, that should cover the going rate in a long-term care facility.
"The bad news is that the reader is probably paying too much for the three policies even before the premium increase," he wrote. "Each policy payment includes a few dollars to handle administrative costs (i.e., postage, data entry) for each policy. The reader should contact the insurance company to see if they will combine the three policies into one.
"Was selling three policies illegal on the agent's part? I'm not a lawyer, but after 30 years in the insurance business I would guess the agent's selling three policies was lack of knowledge — but nothing illegal or worth taking to the insurance commissioner."
So, Vicki, it sounds like your friend has a few options that could improve her situation in the short term. And in the long run, it sounds like she and her husband — and all of us — have some planning to do.
If you have a financial question — or a story about good or bad customer service — please e-mail it to me at gkratz@desnews.com or send it to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.
E-mail: gkratz@desnews.com